How Does An Auditor Verify The Dividends Proposed And Other Outstanding Expenses Of A Business Company?

How Does An Auditor Verify The Dividends Proposed And Other Outstanding Expenses Of A Business Company?

The proposed dividends of a company include matters like the provision applicable for depreciation, sharing of profit funds or the transfer of reserves and so on. It forms the responsibility of an Auditor to

  • Make sure if these planned dividends comply with the Company Act and are also legally approved by the Court.
  • He must take the appropriate measures to understand the board’s decision regarding this and besides review the notes made regarding the Profit and Loss Appropriation account.
  • Corresponding to the Company’s Act, provisions should be made to provide the gross dividend for sure.
  • To complete the procedure of evaluation with this dividend strategy, the Auditor must double-check with the names listed in the dividend note and ensure that the register holds the respective titles of the shareholders.

For considering the outstanding expenses of a company, the Auditor should

  • Initially obtain a written letter from the dependable officer confirming whether these expenses are added in the current year’s accounts or not.
  • To evaluate the amount paid on the different accounts, the Auditor must cross-check the sum with the entries made in the cashbook of the company.
  • Observe if all the unpaid accounts of the outstanding expenses of the organization are recorded at the date of the Balance sheet.
  • Moreover, all the expenses like the rent, wages, audit fee and so on must be surely accounted in the book of records and the Auditor must check with it.
  • Also, the entries made in the books with regard to the invoices received must be validated so as to ensure if these accounts are not associated with the year under audit.
  • Further, he can conduct a comparative analysis to see if all the paid and unpaid type of expenses of the previous and the current year does not portray much difference.
  • Though ensure if all the outstanding wages and salaries have been paid off correctly without keeping any dues.

Bank Overdraft is another area under consideration. This includes all the loans advanced by the company for satisfying the financial purposes of the same. It is the Auditor’s duty to

  • Examine in detail the Bank Passbook records and other calls for the assuring the statements made regarding the mortgaged assets.
  • Make sure these properties that are mortgaged is accurately stated in the Balance Sheet of the business organization.